If
the corporation is selling stock, a Stock Purchase
Agreement can be advisable. The key ingredients
of these agreements are as follows
- Type
of security: The type of security (for
example, common stock or preferred stock)
is set forth;
- Price
and number of shares: The price per
share and the number of shares being sold
is identified;
- Representations
and warranties of the company: A list
of representations and warranties made to
the investors by the company is included.
The agreement's representations and warranties
are important. Here, the company must present
a truthful picture of the business's financial
and operational state. A breach of the company's
representations and warranties (a false
or misleading statement) can lead to a real
problem for the company, giving the investors
various remedies;
- Representations
and warranties of the investor: The
agreement can have the investor represent
and warrant that he or she:
- Has
the knowledge and experience necessary
to evaluate the investment adequately;
- Has
had an opportunity to review and documents
he or she requested;
- Has
had prior personal or business relationships
with the company, its officers, or directors;
or has the business sense to protect
his or her own interest in the transaction;
and
- Realizes
that the stock is sold pursuant to an
exemption from the securities laws and
is not freely transferable;
- Covenants:
Any promise by the company to do various
things are often set forth;
- Conditions:
Any conditions to closing of the deal are
set forth (for example, various certificates
or opinion letters to be delivered); and
- Closing
date: The date and place where the closing
is to occur are set forth, together with
how the money or other consideration will
be delivered to the company.
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